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On the relevance of low-carbon stock indices to tackle climate change

Author

Listed:
  • Manuel Coeslier

    (Audencia Business School, LHEEA - Laboratoire de recherche en Hydrodynamique, Énergétique et Environnement Atmosphérique - ECN - École Centrale de Nantes - CNRS - Centre National de la Recherche Scientifique)

  • Céline Louche

    (Audencia Business School)

  • Jean-François Hétet

    (LHEEA - Laboratoire de recherche en Hydrodynamique, Énergétique et Environnement Atmosphérique - ECN - École Centrale de Nantes - CNRS - Centre National de la Recherche Scientifique)

Abstract

In a context where the necessary transition to a climate-resilient economy creates financing needs as well as new and underestimated financial risks for investors, low-carbon or carbonefficient financial indices represent a rapidly growing and promising instrument. By building and testing representative optimization methodologies for low-carbon stock indices, this study investigates their ability to both (i) allow investors to hedge against climate-related financial risks and (ii) promote companies with higher contribution to the energy transition. The analysis is based on a large European stock index for which we benefit from a complete set of bottom-up calculated environmental indicators, including indirect and avoided carbon emissions figures. The results indicate that mainstream low-carbon indices methodologies fail to address the challenges they are based on and call for further improvements in order to align diversified financial instruments with ambitious climate objectives.

Suggested Citation

  • Manuel Coeslier & Céline Louche & Jean-François Hétet, 2016. "On the relevance of low-carbon stock indices to tackle climate change," Post-Print hal-01356163, HAL.
    • Handle: RePEc:hal:journl:hal-01356163
    DOI: 10.1080/20430795.2016.1223471
    Note: View the original document on HAL open archive server: https://hal.science/hal-01356163
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    Cited by:

    1. Théophile Anquetin & Guillaume Coqueret & Bertrand Tavin & Lou Welgryn, 2022. "Scopes of carbon emissions and their impact on green portfolios," Post-Print hal-04144612, HAL.
    2. Cunha, Felipe Arias Fogliano de Souza & Meira, Erick & Orsato, Renato J. & Klotzle, Marcelo Cabus & Lucena, André F.P., 2021. "Do low-carbon investments in emerging economies pay off? Evidence from the Brazilian stock market," International Review of Financial Analysis, Elsevier, vol. 74(C).
    3. Anquetin, Théophile & Coqueret, Guillaume & Tavin, Bertrand & Welgryn, Lou, 2022. "Scopes of carbon emissions and their impact on green portfolios," Economic Modelling, Elsevier, vol. 115(C).

    More about this item

    Keywords

    Sustainable finance; lowcarbon indices; Carbon footprint; Financed emissions; Avoided emissions;
    All these keywords.

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